searching for the ideal stop

Searching for the ideal stop is crucial, as when you invest, you want to protect your investments. Therefore, people use stops, which are essential in technical analysis.. Not using stops is like driving a car downhill without brakes. Colleagues often argue that stops are bad because you get stopped out too early and miss the following move up. I usually ask them “what kind of stop are you using?” I get answers like

• No stop
• Fixed amount stop
• Percentage stop
• Average True Range stop (“ATR”)
• Trailing stop

So what is the “ideal” stop? If you have absolutely no idea, try the popular indicator (“Supertrend”) often used as a good way to start:

It is a good start, but often late, or in volatile sessions, you will miss out the upper half of the move. Plus, it does not start when you buy a stock, but it has fixed rules for[…]